HOME BUILDER RESOLVES ALLEGATIONS OF CLEAN WATER ACT VIOLATIONS

FROM:  U.S. ENVIRONMENTAL PROTECTION AGENCY
Home-builder Toll Brothers Inc. to Pay $741,000 Clean Water Act Penalty and Implement Company-Wide Stormwater Controls 
Settlement to prevent millions of pounds of sediment and polluted stormwater runoff from entering U.S. waterways each year
WASHINGTON –The U.S. Environmental Protection Agency (EPA) and the U.S. Department of Justice announced that Toll Brothers Inc., one of the nation’s largest homebuilders, will pay a civil penalty of $741,000 to resolve alleged Clean Water Act violations at its construction sites, including sites located in the Chesapeake Bay Watershed. Toll Brothers will also invest in a company-wide stormwater compliance program to improve employee training and increase management oversight at all current and future residential construction sites across the nation. The company is required to inspect its current and future construction sites routinely to minimize stormwater runoff from sites. Polluted stormwater runoff and sediment from construction sites can flow directly into the nearest waterway, affecting drinking water quality and damaging valuable aquatic habitats.

“Keeping contaminated stormwater runoff out of the nation’s waterways, like the Chesapeake Bay, is one of EPA’s top priorities,” said Cynthia Giles, assistant administrator for EPA’s Office of Enforcement and Compliance and Assurance. “Today’s settlement will improve oversight of stormwater runoff at construction sites across the country and protect America’s waters.”

“This settlement will help protect the nation’s waters from the harmful pollutants contained in stormwater runoff from construction sites,” said Ignacia S. Moreno, assistant attorney general for the Environment and Natural Resources Division of the Department of Justice. “The settlement requires Toll Brothers to implement system-wide management controls and training that will help prevent polluted stormwater runoff from contaminating rivers, lakes and sources of drinking water.”

EPA estimates the settlement will prevent millions of pounds of sediment from entering U.S. waterways every year, including sediment that would otherwise enter the Chesapeake Bay, North America’s largest and most biologically diverse estuary. The bay and its tidal tributaries are threatened by pollution from a variety of sources and are overburdened with nitrogen, phosphorus and sediment that can be carried by stormwater.

The complaint, filed simultaneously with the settlement agreement, alleges over 600 stormwater violations that were discovered through site inspections and by reviewing documentation submitted by Toll Brothers. The majority of the alleged violations involve Toll Brothers’ repeated failures to comply with permit requirements at its construction sites, including requirements to install and maintain adequate stormwater pollution controls.

The Clean Water Act requires permits for the discharge of stormwater runoff. In general, Toll Brothers’ permits require that construction sites have controls in place to prevent pollution from being discharged with stormwater into nearby waterways. These controls include common-sense safeguards such as silt fences, phased site grading and sediment basins to prevent construction contaminants from entering the nation’s waterways.

The settlement requires Toll Brothers to obtain all required permits, develop site-specific pollution prevention plans for each construction site, conduct additional site inspections beyond those required by stormwater regulations, and document and promptly correct any problems. The company must properly train construction managers and contractors on stormwater requirements and designate trained staff for each site. Toll Brothers must also submit national compliance summary reports to EPA based on management oversight inspections and reviews.

This settlement is the latest in a series of enforcement actions to address stormwater violations from residential construction sites around the country. Construction projects have a high potential for environmental harm because they disturb large areas of land and significantly increase the potential for erosion, and stormwater runoff from sites can pick up other pollutants, including concrete washout, paint, used oil, solvents and trash.

The state of Maryland and the commonwealth of Virginia have joined the settlement and will receive a portion of the $741,000 penalty. The settlement includes Toll Brothers sites in
Arizona, California, Colorado, Connecticut, Delaware, Florida, Georgia, Illinois, Maryland, Massachusetts, Michigan, Minnesota, New Jersey, New York, North Carolina, Nevada, Ohio, Pennsylvania, Rhode Island, South Carolina, Texas, Virginia and West Virginia.

The consent decree, lodged in the U.S. District Court for the Eastern District of Pennsylvania, is subject to a 30-day public comment period and approval by the federal court.

More information about this settlement: http://www.epa.gov/compliance/resources/cases/civil/cwa/tollbrothers.html

TWO COMPANIES AND OWNER AGREE TO SETTLEMENT IN STOCK-LENDING CASE

FROM:  SECURITIES AND EXCHANGE COMMISSION
Washington, D.C., June 21, 2012 – The Securities and Exchange Commission today charged a New Jersey businessman with running a stock-lending scheme that defrauded public company officials and brought restricted stock to the market.


Ayuda Equity Funding, LLC and AmeriFund Capital Holdings, LLC, both located in North Butler, New Jersey, and owner Manuel M. Bello, agreed to settle the SEC’s complaint without admitting or denying the allegations. Bello and the firms jointly agreed to return $3.2 million of allegedly ill-gotten gains, plus interest. Bello, of Kinnelon, New Jersey, also agreed to pay a $500,000 penalty and be permanently barred from the securities industry.


The case is the second the SEC has brought this year involving stock lending. In March, the SEC charged two executives and their California-based firm with defrauding corporate officials in an $8 million stock-lending scheme.


“We are continuing to clamp down on misconduct in the opaque stock-collateralized lending industry,” said Scott W. Friestad, Associate Director of the SEC’s Division of Enforcement. “Firms cannot induce borrowers to transfer stock to them as purported collateral for loans but then turn right around and sell the borrowers’ stock into the market to fund their operations.”
According to the SEC’s complaint, Ayuda and AmeriFund reaped more than $3.2 million of illegal gains on loans to public company officers and directors who put up stock as collateral. Although some borrowers received written and oral assurances that the stock would not be sold as long as they did not default on their loan payments, Ayuda and AmeriFund sold the shares before or soon after making the loans, the SEC alleged.


The SEC also alleged that in at least 35 loan transactions, Ayuda and AmeriFund sold the borrowers’ restricted shares into the market without registering the transactions and the firms and Bello themselves failed to register with the SEC as brokers or dealers. Without admitting or denying the SEC’s allegations, Ayuda, AmeriFund, and Bello consented to a final judgment permanently enjoining them from violating federal anti-fraud, broker-dealer registration, and securities registration laws. The settlement is subject to court approval.


In a separate administrative proceeding, the SEC charged Howard L. Blum, alleging that he brokered numerous transactions for Ayuda without being registered as a broker or dealer. Blum, without admitting or denying the SEC’s findings, agreed to return more than $1 million of allegedly ill-gotten gains, plus interest, pay a $50,000 penalty, and be suspended from the securities industry for twelve months.
The SEC’s investigation was conducted by Jacob D. Krawitz and supervised by Julie M. Riewe.

NORFOLK SOUTHERN RAILWAY CO. TO PAY $800,000 AFTER TERMINATION INJURED WORKERS

FROM:  U.S. DEPARTMENT OF LABOR
Norfolk Southern Railway Co. ordered by US Labor Department's OSHA to pay more than $800,000 after terminating injured workers
Investigation found violations of Federal Railroad Safety Act whistleblower provisions
WASHINGTON — The U.S. Department of Labor's Occupational Safety and Health Administration has found that Norfolk Southern Railway Co. violated the whistleblower protection provisions of the Federal Railroad Safety Act and consequently has ordered the company to pay three whistleblowers $802,168.70 in damages, including $525,000 in punitive damages and attorneys' fees. Additionally, the company has been ordered to expunge the disciplinary records of the whistleblowers, post workplace notices regarding railroad employees' whistleblower protection rights and provide training to its employees about these rights.

Three concurrent investigations were completed by OSHA's offices in Columbia, S.C.; Nashville, Tenn.; and Harrisburg, Pa. The investigations revealed reasonable cause to believe that the employees' reporting of their workplace injuries led to internal investigations and, ultimately, to dismissals from the company.

A laborer based in Greenville, S.C., was terminated on Aug. 14, 2009, after reporting an injury as a result of being hit by the company's gang truck. The railroad charged the employee, a laborer, with improper performance of duties. OSHA found that the employee was treated disparately in comparison to four other employees involved in the incident. The laborer was the only employee injured and, thus, the only employee who reported an injury. He also was the only employee terminated. OSHA has ordered the railroad to pay punitive damages of $200,000 as well as compensatory damages of $110,852 and attorney's fees of $14,325.

In Louisville, Ky., an engineer at a Norfolk Southern facility was terminated on March 31, 2010, after reporting an injury as a result of tripping and falling in a locomotive restroom. The railroad, after an investigative hearing, charged the employee with falsifying his injury. OSHA found that the investigative hearing was flawed and orchestrated to intentionally support the decision to terminate the employee. OSHA has ordered the railroad to pay the employee $150,000 in punitive damages, $50,000 in compensatory damages and $7,375 in attorney's fees.

On July 22, 2010, a railroad conductor based in Harrisburg, Pa., was terminated after reporting a head injury sustained when he blacked out and fell down steps while returning from the locomotive lavatory. The company, after an investigative hearing presided over by management officials, found the employee guilty of falsifying a report of a work-related injury, failing to promptly report the injury, and making false and conflicting statements. The day before the injury, the employee had been lauded for excellent performance, highlighted by no lost work time due to injuries in his 35-year career. OSHA found that the investigative hearing was flawed, and there was no evidence the employee intended to misrepresent his injury. OSHA is ordering the railroad to pay the employee $175,000 in punitive damages, $76,623.27 in back wages plus interest and $17,993.43 in compensatory damages, as well as all fringe benefits.

"Firing workers for reporting an injury is not only illegal, it also endangers all workers. When workers are discouraged from reporting injuries, no investigation into the cause of an injury can occur," said Assistant Secretary of Labor for Occupational Safety and Health Dr. David Michaels. "To prevent more injuries, railroad workers must be able to report an injury without fear of retaliation. The Labor Department will continue to protect all employees, including those in the railroad industry, from retaliation for exercising these basic worker rights. Employers found in violation will be held accountable."

These actions follow several other orders issued by OSHA against Norfolk Southern Railway Co. in the past year. OSHA's investigations have found that the company continues to retaliate against employees for reporting work-related injuries and has effectively created a chilling effect in the railroad industry.

Any party to this case can file an appeal with the Labor Department's Office of Administrative Law Judges.

Norfolk Southern Railway Co. is a major transporter/hauler of coal and other commodities, serving every major container port in the eastern United States with connections to western carriers. Its headquarters are in Norfolk, Va., and it employs more than 30,000 union workers worldwide.

OSHA enforces the whistleblower provisions of the FRSA and 20 other statutes protecting employees who report violations of various securities laws, trucking, airline, nuclear power, pipeline, environmental, rail, maritime, health care, workplace safety and health regulations, and consumer product safety laws.

Under the various whistleblower provisions enacted by Congress, employers are prohibited from retaliating against employees who raise various protected concerns or provide protected information to the employer or to the government. Employees who believe that they have been retaliated against for engaging in protected conduct may file a complaint with the secretary of labor for an investigation by OSHA's Whistleblower Protection Program.

OWNER OF SOUTHERN CALIFORNIA-BASED MESQUITE CHARCOAL DISTRIBUTOR PLEADS GUILTY TO CUSTOMER ALLOCATION AND BID- RIGGING CONSPIRACY

FROM:  U.S. DEPARTMENT OF JUSTICE ANTITURST DIVISION
WASHINGTON — The owner of a southern California-based mesquite charcoal distributor pleaded guilty for his role in a customer allocation and bid-rigging conspiracy for the sale of mesquite charcoal, the Department of Justice announced today.

According to a one-count felony charge filed on May 7, 2012, in the U.S. District Court in San Francisco, William W. Lord, the owner of Carpinteria, Calif. -based Chef's Choice Mesquite Charcoal, participated in a conspiracy with competitors to refrain from competing for each other's customers and to submit noncompetitive bids for the sale of mesquite charcoal. According to the plea agreement, Lord has agreed to cooperate with the department's ongoing investigation.

"Today's charge demonstrates the Antitrust Division's commitment to prosecute bid-rigging conspiracies that involve products used in the everyday lives of consumers and businesses' daily operations," said Acting Assistant Attorney General Joseph Wayland in charge of the Department of Justice's Antitrust Division.

Chef's Choice distributes and sells mesquite charcoal throughout the United States. Mesquite charcoal, which is typically used by restaurants and individuals to grill meat, fish and poultry, is primarily produced in Mexico and then sold to distributors in the United States for eventual resale to restaurants and consumers.

According to court documents, the charged conspiracy began as early as January 2000 and lasted until about September 2010. Lord and his competitors, a Los Angeles-area mesquite charcoal distributor and a San Francisco-area mesquite charcoal distributor, entered into an agreement to refrain from competing for the sale of mesquite charcoal to each other's customers. The purpose of this agreement was to ensure that Lord and his competitors would not have to reduce mesquite charcoal prices in the face of competition in order to retain their customers. Lord and his competitors carried out the conspiracy in various ways, including: refraining from submitting bids for the sale of mesquite charcoal to each other's customers; submitting intentionally noncompetitive bids to each other's customers; and communicating with each other regarding what price to bid and then submitting agreed-upon, noncompetitive bids to each other's customers.

Lord is charged with violating the Sherman Act, which carries a maximum penalty of 10 years in prison and a $1 million fine for individuals. The maximum fine may be increased to twice the gain derived from the crime or twice the loss suffered by the victim of the crime if either of those amounts is greater than the statutory maximum fine.

Today's guilty plea arose from an ongoing federal investigation of the mesquite charcoal industry in the United States. The investigation is being conducted by the Department of Justice Antitrust Division's Chicago Field Office and the FBI's San Francisco Office. Anyone with information concerning customer allocation, bid rigging or price fixing related to the mesquite charcoal industry in the United States should contact the Antitrust Division's Chicago Field Office at 312-353-7530 or visit www.justice.gov/atr/contact/newcase.htm.

OSHA CITES SUBSIDIARY OF NESTLE SA FOR SAFETY VIOLATIONS FOLLOWING DEATH OF WORKER

FROM:  U.S. DEPARTMENT OF LABOR
US Labor Department’s OSHA cites Tribe Mediterranean Foods for safety violations following death of a worker in Taunton, Mass.
Employees lacked necessary training to prevent ‘needless and avoidable loss of life’
BRAINTREE, Mass. — The U.S. Department of Labor's Occupational Safety and Health Administration has cited Tribe Mediterranean Foods, a subsidiary of Nestle SA that manufactures Tribe brand hummus products, for 18 alleged violations of workplace safety standards following the death of a worker at its Taunton production plant. OSHA's South Boston Area Office opened an inspection on Dec. 16, 2011, after a contract employee who was cleaning and sanitizing a machine used in the hummus manufacturing process was caught, pulled into the machine and crushed to death between two rotating augers.
OSHA's investigation found that Tribe Mediterranean Foods had not trained the deceased worker and six other workers who cleaned plant machinery on hazardous energy control or "lockout/tagout" procedures. These are the procedures employers must put into effect and train workers to follow to shut down machines and lock out their power sources before cleaning or performing maintenance on them. The purpose of lockout/tagout procedures is to ensure that the machines are not operating, and cannot unexpectedly activate and harm workers. OSHA requires that employers train workers so that they understand the purpose of the energy control procedures, and have the knowledge and skills required to safely utilize them.

"The employer knew it needed to train these workers so they could protect themselves against just this type of hazard but failed to do so. The result was a needless and avoidable loss of life," said Assistant Secretary of Labor for Occupational Safety and Health Dr. David Michaels. "In this case, Tribe Mediterranean Foods' knowledge and continuous disregard for an obvious and deadly hazard was so pronounced that we are issuing seven willful citations for lack of training, one for each untrained worker exposed to the hazard."
When there is a particularly egregious lack of compliance and exposure to hazards, OSHA can issue citations on a per-instance basis, in this case, representing one willful violation for each untrained employee exposed to a hazard.

OSHA has issued Tribe Mediterranean Foods citations for two additional willful violations, one for failing to adequately train maintenance workers to recognize hazardous energy sources, and one for failing to develop and utilize lockout/tagout procedures. A willful violation is one committed with intentional knowing or voluntary disregard for the law's requirements, or with plain indifference to worker safety and health.
Citations for three repeat violations have been issued for failing to conduct periodic inspections of the energy control procedures, inadequate guarding of rotating blades on blending tanks, and an exposed chain and sprocket on a conveyor. A repeat violation can be cited when an employer previously has been cited for the same or a similar violation of a standard, regulation, rule or order at any facility in federal enforcement states within the last five years. OSHA cited Tribe Mediterranean Foods, doing business as FoodTech International Inc., in October 2009, for similar hazards at its New Haven, Conn., plant.
Finally, Tribe Mediterranean Foods has been issued citations covering six serious violations for electrical, slipping, fall, pallet jack and additional machine guarding hazards. A serious violation occurs when there is substantial probability that death or serious physical harm could result from a hazard about which the employer knew or should have known.

The citations can be viewed at Http://www.osha.gov/ooc/citations/TribeMediterraneanFoodsIncorporated_315145953_0612_12.pdf.
Tribe Mediterranean Foods, which faces a total of $702,300 in proposed fines, has 15 business days from receipt of its citations and proposed penalties to comply, meet with OSHA or contest the findings before the independent Occupational Safety and Health Review Commission.

Due to the willful and repeat violations and the nature of the hazards, OSHA has placed Tribe Mediterranean Foods in its Severe Violator Enforcement Program, which mandates targeted follow-up inspections to ensure compliance with the law. The program focuses on recalcitrant employers that endanger workers by committing certain willful, repeat or failure-to-abate violations.
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Tribe Mediterranean Foods is a subsidiary of Tivall 1993 LTD, which is owned by Osem Investments Limited, a subsidiary of Nestle SA. The Osem Group of companies produces and distributes certified-kosher food products in Israel, Europe and the United States. In addition to Osem and Migdanot Habayit products, the company imports, markets and distributes throughout the United States products from Wissotzki, Matzot Rishon, Matzot Karmel, Einat, Couscous Maison, Milos, Progress, Tempo, Beit Hashita, Beigel & Beigel, Manamim, Creative and Menora Candles.

The workers' compensation carrier insuring Tribe Mediterranean Foods through parent company OSEM Foods is Liberty Mutual Insurance Co.

Under the Occupational Safety and Health Act of 1970, employers are responsible for providing safe and healthful workplaces for their employees. OSHA's role is to ensure these conditions for America's working men and women by setting and enforcing standards, and providing training, education and assistance.

ENERGY PLANT SERVICE PROVIDER RESOLVES FOREIGN CORRUPT PRACTICES ACT VIOLATIONS

FROM:  U.S. DEPARTMENT OF JUSTICE
Monday, June 18, 2012
Data Systems & Solutions LLC Resolves Foreign Corrupt Practices Act Violations and Agrees to Pay $8.82 Million Criminal Penalty
Data Systems & Solutions LLC (DS&S), a company based in Reston, Va., that provides design, installation, maintenance and other services at nuclear and fossil fuel power plants, has agreed to pay an $8.82 million criminal penalty to resolve violations of the Foreign Corrupt Practices Act (FCPA), announced Principal Deputy Assistant Attorney General Mythili Raman of the Justice Department’s Criminal Division and U.S. Attorney for the Eastern District of Virginia Neil H. MacBride.

The department filed a two-count criminal information today in the Eastern District of Virginia charging DS&S with conspiring to violate, and violating, the FCPA’s anti-bribery provisions.

According to court documents, DS&S paid bribes to officials employed by the Ignalina Nuclear Power Plant, a state-owned nuclear power plant in Lithuania, to secure contracts to perform services for the plant.   To disguise the scheme, the bribes were funneled through several subcontractors located in the United States and abroad.   The subcontractors, in turn, made repeated payments to high-level officials at Ignalina via check or wire transfer.

The department also filed today a deferred prosecution agreement with DS&S.   Under the terms of the agreement, the department will defer prosecution of DS&S for two years.   In addition to the monetary penalty, DS&S agreed to cooperate with the department, to report periodically to the department concerning DS&S’s compliance efforts, and to continue to implement an enhanced compliance program and internal controls designed to prevent and detect FCPA violations.   If DS&S abides by the terms of the deferred prosecution agreement, the department will dismiss the criminal information when the agreement’s term expires.

The agreement acknowledges DS&S’s extraordinary cooperation, including conducting an extensive, thorough and swift internal investigation; providing to the department extensive information and evidence; and responding promptly and fully to the department’s requests.   In addition, DS&S has engaged in extensive remediation, including terminating the officers and employees responsible for the corrupt payments; instituting a more rigorous compliance program; enhancing its due diligence protocol for third-party agents and subcontractors; strengthening its ethics policies; providing FCPA training for all agents and subcontractors; and establishing heightened review of most foreign transactions.

The case is being prosecuted by Trial Attorney Daniel S. Kahn of the Criminal Division’s Fraud Section and Assistant U.S. Attorney Charles Connolly from the Eastern District of Virginia.   The case was investigated by the FBI’s Washington Field Office, the Department of Energy Office of Inspector General, and the Internal Revenue Service Criminal Investigation’s Washington D.C. Field Office.   The Criminal Division’s Office of International Affairs provided assistance.

MORTGAGE COMPANY EXECUTIVE GOES TO PRISON FOR PART IN $2.9 BILLION FRAUD SCHEME

FROM:  U.S. DEPARTMENT OF JUSTICE
Friday, June 15, 2012
Former Chief Financial Officer of Taylor, Bean & Whitaker Sentenced to 60 Months in Prison for Fraud Scheme
WASHINGTON – Delton de Armas, a former chief financial officer (CFO) of Taylor, Bean & Whitaker Mortgage Corp. (TBW), was sentenced today to 60 months in prison for his role in a more than $2.9 billion fraud scheme that contributed to the failure of TBW
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De Armas was sentenced today by U.S. District Judge Leonie M. Brinkema in the Eastern District of Virginia.  The sentence was announced today by Assistant Attorney General Lanny A. Breuer of the Criminal Division; U.S. Attorney Neil H. MacBride for the Eastern District of Virginia; Christy Romero, Special Inspector General, Office of the Special Inspector General for the Troubled Asset Relief Program (SIGTARP); Assistant Director in Charge James W. McJunkin of the FBI’s Washington Field Office; David A. Montoya, Inspector General of the Department of Housing and Urban Development (HUD-OIG); Jon T. Rymer, Inspector General of the Federal Deposit Insurance Corporation (FDIC-OIG); Steve A. Linick, Inspector General of the Federal Housing Finance Agency (FHFA-OIG); and Richard Weber, Chief of the Internal Revenue Service Criminal Investigation (IRS-CI).

De Armas, 41, of Carrollton, Texas, pleaded guilty in March to one count of conspiracy to commit bank and wire fraud and one count of making false statements.

“For years, Mr. de Armas, the CFO of one of the country’s largest private mortgage companies, helped defraud financial institutions by concealing from them billions of dollars in losses,” said Assistant Attorney General Breuer.  “His lies and deceits contributed to the devastating losses suffered by major institutional investors.  As a consequence for his crimes, he will now spend the next five years of his life behind bars.”

“As CFO, Mr. de Armas could have – and should have – put a stop to the massive fraud at TBW the moment he discovered it,” said U.S. Attorney MacBride. “Instead, he and others lied for years on end to investors, banks, regulators and auditors and caused more than $2.4 billion in losses to major financial institutions.”

“Rather than blow the whistle on billions of dollars in fraud, de Armas chose to help conceal it,” said Special Inspector General Romero.  “This CFO lied to investors, banks, regulators and auditors to cover up the massive fraud scheme which resulted in the failure of both TBW and Colonial Bank.  The court’s decision to sentence de Armas to five years in prison reflects the seriousness of his role as a gatekeeper within TBW and the contribution of his crime to our nation’s financial crisis.”

“The actions of Mr. De Armas and others resulted in the loss of billions of dollars to major financial institutions,” said Assistant Director in Charge McJunkin.  “Today’s sentence serves as a warning to anyone who attempts to take advantage of investors and our banking system.  Together with our law enforcement partners, the FBI will pursue justice for anyone involved in such fraudulent schemes.”

According to court documents, de Armas joined TBW in 2000 as its CFO and reported directly to its chairman, Lee Bentley Farkas, and later to its CEO, Paul Allen.  He previously admitted in court that from 2005 through August 2009, he and other co-conspirators engaged in a scheme to defraud financial institutions that had invested in a wholly-owned lending facility called Ocala Funding.  Ocala Funding obtained funds for mortgage lending for TBW from the sale of asset-backed commercial paper to financial institutions, including Deutsche Bank and BNP Paribas. The facility was managed by TBW and had no employees of its own.

According to court records, shortly after Ocala Funding was established, de Armas learned there were inadequate assets backing its commercial paper, a deficiency referred to internally at TBW as a “hole” in Ocala Funding.  De Armas knew that the hole grew over time to more than $700 million.  He learned from the CEO that the hole was more than $1.5 billion at the time of TBW’s collapse.  De Armas admitted he was aware that, in an effort to cover up the hole and mislead investors, a subordinate who reported to him had falsified Ocala Funding collateral reports and periodically sent the falsified reports to financial institution investors in Ocala Funding and to other third parties.  De Armas acknowledged that he and the CEO also deceived investors by providing them with a false explanation for the hole in Ocala Funding.

De Armas also previously admitted in court that he directed a subordinate to inflate an account receivable balance for loan participations in TBW’s financial statements.  De Armas acknowledged that he knew that the falsified financial statements were subsequently provided to Ginnie Mae and Freddie Mac for their determination on the renewal of TBW’s authority to sell and service securities issued by them.

In addition, de Armas admitted in court to aiding and abetting false statements in a letter the CEO sent to the U.S. Department of Housing and Urban Development, through Ginnie Mae, regarding TBW’s audited financial statements for the fiscal year ending on March 31, 2009.  De Armas reviewed and edited the letter, knowing it contained material omissions.  The letter omitted that the delay in submitting the financial data was caused by concerns its independent auditor had raised about the financing relationship between TBW and Colonial Bank and its request that TBW retain a law firm to conduct an internal investigation.  Instead, the letter falsely attributed the delay to a new acquisition and TBW’s switch to a compressed 11-month fiscal year.

“We are pleased to have joined our law enforcement colleagues in bringing Mr. de Armas to justice,” said Inspector General Rymer.  “The former Chief Financial Officer’s actions contributed to one of the largest bank frauds in the country and led to the demise of TBW.  His punishment, along with the earlier sentencings of other co-conspirators involved in the Colonial Bank and TBW scheme, sends a clear message that those who abuse their positions of trust and seek to undermine the integrity of the financial services industry will be held accountable.  We will continue to pursue such cases in the interest of ensuring the safety and soundness of our Nation’s banks and the strength of the financial services industry as a whole.”

“Delton de Armas was a key player in the TBW fraud; the significant sentence of 60 months handed down today appropriately takes that role into account,” said Inspector General Linick.

In April 2011, a jury in the Eastern District of Virginia found Lee Bentley Farkas, the chairman of TBW, guilty of 14 counts of conspiracy, bank, securities and wire fraud.  On June 30, 2011, Judge Brinkema sentenced Farkas to 30 years in prison.  In addition, six individuals have pleaded guilty for their roles in the fraud scheme, including: Paul Allen, former chief executive officer of TBW, who was sentenced to 40 months in prison; Raymond Bowman, former president of TBW, who was sentenced to 30 months in prison; Desiree Brown, former treasurer of TBW, who was sentenced to six years in prison; Catherine Kissick, former senior vice president of Colonial Bank and head of its Mortgage Warehouse Lending Division (MWLD), who was sentenced to eight years in prison; Teresa Kelly, former operations supervisor for Colonial Bank’s MWLD, who was sentenced to three months in prison; and Sean Ragland, a former senior financial analyst at TBW, who was sentenced to three months in prison.

The case is being prosecuted by Deputy Chief Patrick Stokes and Trial Attorney Robert Zink of the Criminal Division’s Fraud Section and Assistant U.S. Attorneys Charles Connolly and Paul Nathanson of the Eastern District of Virginia.  This case was investigated by SIGTARP, FBI’s Washington Field Office, FDIC OIG, HUD OIG, FHFA OIG and the IRS Criminal Investigation.  The Financial Crimes Enforcement Network (FinCEN) of the Department of the Treasury also provided support in the investigation.  The Department would also like to acknowledge the substantial assistance of the SEC in the investigation of the fraud scheme.

This prosecution was brought in coordination with President Barack Obama’s Financial Fraud Enforcement Task Force.  President Obama established the interagency Financial Fraud Enforcement Task Force to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes.  The task force includes representatives from a broad range of federal agencies, regulatory authorities, inspectors general and state and local law enforcement who, working together, bring to bear a powerful array of criminal and civil enforcement resources.  The task force is working to improve efforts across the federal executive branch, and with state and local partners, to investigate and prosecute significant financial crimes, ensure just and effective punishment for those who perpetrate financial crimes, combat discrimination in the lending and financial markets, and recover proceeds for victims of financial crimes.

FORMER VP OF CONTROL COMPONENTS INC. PLEADS GUILTY TO FOREIGN BRIBERY OFFENSE

FROM:  U.S. DEPARTMENT OF JUSTICE
Friday, June 15, 2012
Former Vice President at California Valve Company Pleads Guilty to Foreign Bribery Offense
WASHINGTON – David Edmonds, the former vice president of worldwide customer service at Rancho Santa Margarita, Calif.-based valve company Control Components Inc. (CCI), pleaded guilty today to violating the Foreign Corrupt Practices Act (FCPA), announced the Justice Department’s Criminal Division, the U.S. Attorney’s Office for the Central District of California and the FBI’s Washington Field Office.

Edmonds, who resides in San Clemente, Calif., pleaded guilty today before U.S. District Judge James V. Selna in Santa Ana, Calif., to a one-count superseding information charging him with making a corrupt payment to a foreign government official in Greece in violation of the FCPA.  According to court documents, CCI designed and manufactured service control valves for use in the nuclear, oil and gas, and power generation industries worldwide.

At sentencing, Edmonds, 59, faces up to 15 months in prison.  Sentencing is scheduled for Nov. 19, 2012.

Edmonds is the seventh former CCI executive to plead guilty to FCPA charges in connection with the company’s bribery scheme:

On May 29, 2012, Paul Cosgrove, CCI’s former head of worldwide sales, pleaded guilty to one count of making a corrupt payment to a foreign government official.
On April 17, 2012, Stuart Carson, CCI’s former president, and Hong “Rose” Carson, CCI’s former director of sales for China and Taiwan, each pleaded guilty to one count of making a corrupt payment to a foreign government official.

On April 28, 2011, Flavio Ricotti, CCI’s former vice president of sales for Europe, Africa, and the Middle East, pleaded guilty to one count of conspiring to violate the FCPA.
On Feb. 3, 2009, Richard Morlok, the former CCI finance director, pleaded guilty to one count of conspiracy to violate the FCPA.

On Jan. 8, 2009, Mario Covino, the former director of worldwide factory sales for CCI, pleaded guilty to one count of conspiracy to violate the FCPA.

Stuart and Rose Carson, Cosgrove, Covino, Morlok and Ricotti are scheduled to be sentenced later this year.  FCPA charges brought in April 2009 against Han Yong Kim, the former president of CCI’s Korean office, are pending.  An indictment merely contains allegations and defendants are presumed innocent unless and until proven guilty beyond a reasonable doubt in a court of law.

On July 31, 2009, CCI pleaded guilty to a three-count criminal information charging the company with conspiracy to violate the FCPA and the Travel Act, and two substantive violations of the FCPA.  CCI was ordered to pay an $18.2 million criminal fine, placed on organizational probation for three years, and ordered to create and implement a compliance program and retain an independent compliance monitor for three years.  CCI admitted that from 2003 through 2007, it made corrupt payments in more than 30 countries, which resulted in net profits to the company of approximately $46.5 million from sales related to those corrupt payments.

The case is being prosecuted by Deputy Chief Charles G. La Bella and Trial Attorney Andrew Gentin of the Criminal Division’s Fraud Section and Assistant U.S. Attorneys Douglas McCormick and Gregory Staples of the U.S. Attorney’s Office for the Central District of California.  The case was investigated by the FBI’s Washington Field Office and its team of special agents dedicated to the investigation of foreign bribery cases.